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The International Entrepreneur: Think you know American values?

American culture values doing business internationalLike most of my readers, my business focus is on the world. As an American doing business internationally, I see my fellow countrymen sometimes make assumptions about other business cultures and fall flat in business relationships. The American cultural traits listed below all have implications for Americans doing business abroad.

The world keeps changing, but I think it is important to note that cultural values tend to remain steadfast over time. The United States does not have a long cultural history compared with cultures like in China or India. But its cultural characteristics have been present since before the American Revolution. These traits may be applied in new ways to work within our changing environment, but understanding them gives key insights into how Americans approach business.

Caveat: These are culture generalizations and all traits to not necessarily apply to all Americans in all situations. They may be more or less pronounced in specific regions of the country.

Mainstream American Cultural Traits

1. A high value on “Material well-being”.Anyone traveling through one of the American suburbs can see this cultural trait in action. In its more extreme form, it is materialism. While some cultures share this trait, there are many cultures that rank this as a lower priority. Americans are often willing to sacrifice leisure time for work time, meanwhile all of France goes on vacation in August.

2. 2-fold judgment based on principle. Americans often look for the simple answer to complicated questions. This may be a reason why American businesspeople conduct business so quickly. We don’t always spend the time to understand the fuller context of a situation. Most international situations are nuanced and complex because of culture, business environment and customer preferences. We jump in based on a quick decision we’ve made about a potential partner or an opportunity. It is much more difficult getting out of sticky situations when we are wrong. This cultural trait explains a lot about American politics too. But that is a whole different subject.

3. Tendency of moralizing.In the American culture, we often judge based what is perceived as morally right or wrong without first understanding the context of a situation. For those wishing to do business with Americans, it may help to explain a situation when Americans throw down their opinion prematurely. For Americans, this means ask questions about a situation to understand context & don’t verbalize your conclusions.

4. Distinction between “work” and “play”. Americans do not usually socialize with colleagues and clients as much as in countries like Japan. In Latin America this distinction is blurred too. As Americans doing business abroad, you may be expected to be on call after work if the local culture expects it. For those doing business in the U.S., while there may be occasional dining together, do not expect that your American hosts will always see to your schedule outside of normal work hours. Also, do not necessarily expect to meet an American colleague’s family or friends.

5. Special attitude towards time. Americans focus on “Time Management” the ability to carefully plan our time in order to produce the right outcomes. A common expression in American business is: “Time is money.” The emphasis is on completing the task, the sales transaction, the hiring of new staff, etc. as quickly as possible. For Americans, please understand that the rest of the world knows about this trait and frequently uses it against us. That long, drawn-out negotiation in Thailand may actually be stretched out to encourage Americans to give more concessions. Americans, don’t share your actual timeline with international contacts. For those doing business with Americans, understand that when you feel Americans getting impatient with your long story, it may be time to make your point and move on to the next task or topic.

6. High value on Individual Efforts and Optimism. The American culture is supposed to be a meritocracy people?s fortunes rising and falling based on their individual efforts. This fuels the famous “American Dream” where anyone is supposed to be able to succeed with enough hard work. Americans want to be judged on their efforts, instead on the basis of their family name, socio-economic class, race, age, or gender. At work, we want to be compensated based on their efforts and results relative to their peers.

7. High value on Individualism and Individual Freedom. As Americans, we often focus on the “I” before the “we”. Others may see us sometimes as selfish and disconnected from the group dynamic. We need to be mindful of group context in order to be most effective internationally. When doing business with Americans, it is helpful to know that when the American decides to leave the group early to go do something they prefer, it is not necessarily considered rude in our culture.

8. When it’s man vs. nature, man wins. As Americans, we feel that we should have control over our physical environment. We can design structures to withstand most natural disasters. With medical procedures, we hope to avoid death. This trait also plays a role in some American’s view of Global Warming and our desire to find technologies that allow us to continue current energy usage with less environmental consequence.

9. Avoid uncertainty through legal process (courts, contracts, etc.) and goal setting. For Americans, a legal system should protect individual and business rights. Once someone signs a contract, they are legally obligated to follow its provisions. The contract serves as the foundation of most business relationships. In contrast, for many cultures a contract is not legally enforceable. The business is based on the relationship forged with individuals or enforceable by having friends in power. While such a foundation is much more flexible over time, it is difficult for many American businesspeople to adjust to relationships being more important than contracts.

10. Egalitarianism and Fairness. This value is part of the work environment as access to opportunity. While Americans have a wide range of socio-economic status, we at least try to give equal access for those with talent and drive to success in business. Women now get most of the same opportunities as men. Young people can lead older colleagues if they have the right skills. As a culture, Americans don’t like what they perceive as being unfair. Other cultures may feel that there is no way to be completely egalitarian, so there is little point in trying.

11. Importance of “belonging” – membership. While I believe that more “group-oriented” cultures stress “belonging” more than Americans do, I think Americans associate with others based on shared values. This could be by religious affiliation, hobby or interest, shared education, a passion for a cause, etc. Examples include: Methodists, Harley bikers and those raising funds for cancer research. The important aspect is that Americans decide for themselves what groups with whom they affiliate.

12. Humanitarianism and generosity. Americans are not the only culture to emphasize individual generosity and humanitarian traits. But we do expect that people and companies take social responsibility for issues around them. As an American, realize that not every culture expects similar actions. As someone doing business with Americans, consider contributing to or at least acknowledging a cause championed by the American company.

13. Nationalistic and patriotic. Again, Americans are not the only culture with this characteristic. But Americans need to be mindful that with our country’s relative size and might. Overt nationalism needs to be toned down in the international business environment or be perceived as arrogant and ignorant. And anyone still convinced of America’s exceptionalism should do their homework (education, healthcare, economic opportunities, best countries to do business, etc.) and join the 21st Century.

14.Religiosity (very religious). Religion does play a significant role in many Americans’ lives. It can provide structure for “belonging” to a same-values group. A religious organization often provides ways for its members to donate money and time to help others. Generally, it is wise for those doing business in the U.S. to avoid the topic of religion all together.

(Source of the original cultural trait list: Cross-Cultural Management by Dr. Kang-Rae Cho at the University of Colorado Denver)

I hope you found this article helpful as a perspective on doing business culturally as an American or as someone wishing to do business in the United States. For more help navigating cultural business differences, please contact me.

Best of success to you in all of your international business dealings,

– Becky

The International Entrepreneur: Management Commitment – Vital to International Expansion Success

international business meetingThe last in-house career job I held was sixteen years ago. I was an eager young marketing professional at a growing healthcare software company based in the San Francisco Bay area. The head of our department was a charismatic and experienced Sales and Marketing Vice President we?ll call ?Joe?.

Top leadership at the company changed and Joe couldn?t go along with less-than-ethical orders. When he stood up for what he felt was right, he was ?reassigned? to the role of International Sales.

Now Joe was actually excited about the prospect of building an international sales operation for the company. There was great potential for the company?s products in international markets. He quickly began building a sale pipeline with hospitals and health systems around the world. But before the sales potential could be realized, the company leadership gave Joe his termination notice. The newly formed International Sales Department quickly died away, along with that untapped potential.

The takeaway from Joe?s tale: without management commitment, you might as well skip the internationalization effort all together. International markets require dedication and a long-term strategy of revenue growth and expansion. If management cannot see that growth potential, it will be undermined at the first convenient time to fire a vice president who is out of favor or to cut costs before leadership performance is measured.

How do you know if you have management commitment?

1. International operations are integrated into the whole company

There are many tales of an enterprising young professional who asks for permission to pursue an international sales opportunity and uncovers a huge overseas market.? What usually happens next is that the company?s leaders say ?yes? to the sales opportunity and even to future international sales. It?s a short-term gain, so why not?

Now it?s a few years later and that enterprising young professional has grown this market segment into 20 or 30% of the company?s overall business. What a great international business success story, right?

Here?s where the problem bubbles up: As the business segment grows, the young marketer asks for additional internal resources to keep pace with the growing opportunity. But management still sees the international efforts as a side project to their core market. They don?t incorporate the internationalization into their overall strategy and operations. Eventually the talented young marketer leaves the company in frustration and takes a better job somewhere else. The international business quickly fades away, along with the long-term potential for revenue and profits.

2. Top Company Leaders Are Engaged in International Responsibilities

When new markets are being opened around the world, the President/CEO should be traveling to the new markets and meeting key partners, government officials and potential clients. This is especially true in markets where a position?s title is everything. By not going, the head of the company is telling the market that their commitment is questionable ? which actually is very likely. If your company president cannot travel to India, China or Canada because of preconceived notions of what he will find, he will be unlikely to support you later when more complex business issues arise.

3. Planning for a Long-Term Return on Investment

International markets are a long-term growth accelerator. But it takes a great deal of time to make the right connections, learn about the market and the new potential customers, and control costs. Rarely are international markets profitable in their first year. Now by Year Five, these markets could very well be the driver of your business. But a company leader who consistently brings up ROI as a point of failure when the expansion has just started? This is a manager whose commitment is waning. Beware.

I hope you found this article useful. For more information about doing business internationally, please read more of The International Entrepreneur Articles.

Best of success to you in all of your business ventures,

Becky DeStigter

The International Entrepreneur

The International Entrepreneur: Born Global or No?

baby techIn many parts of the world technology start-ups are expected to become global companies from their inception. Companies like Skype launched into international markets right from the start. The reason why these ?Born Global? companies are a worthy topic in start-up technology circles is that they?

  • Grow faster than domestic-only companies
  • Hire more local staff in their home markets
  • Succeed in greater rates than their domestic counterparts.

But is Born Global a realistic expectation for most tech companies?

As is the standard answer for most international business strategy questions ? it depends.

Here are circumstances that make Born Global a more likely choice:

  • Small Domestic Market. If your company is located in a country like Uruguay (3.3m), Finland (5.4m), or Israel (8.2m), everyone expects you to plan for international expansion right from the start. It is no surprise to see small country tech companies competing effectively in world markets. Entrepreneurs have already cultivated their international market connections. Government and industry resources support this Born Global expectation as well.
  • Small Global Niche Market. It is much easier to globalize when your market is small. With fewer potential buyers there is pressure to find the customers no matter where they are located. For instance, if your company develops some measurement device specific to copper mining then you?ll quickly want to expand to places like Peru and Zambia.
  • Differentiated Product. If your product is valuable enough compared with the available in-country alternatives, local customers can overlook your product and company?s ?foreignness?. They also are more likely to pay a premium, which helps defray any exporting-related costs.
  • Internationally-Minded Company Leaders. This is probably the biggest factor for Born Global companies. I?m not talking about the leader who likes to take his or her spouse occasionally to Paris for a holiday. These are professionals with deep connections in another country. Often they are either immigrants or former exchange students or both. IT outsourcing started with Indian, Pilipino and other immigrants connecting developers in lower-cost markets with software development needs in high-cost markets. An international orientation brings a completely different set of solutions to a start-up.

Going Global Criteria

To be effective in global markets a company needs to have a competitive product, financial stability, and infrastructure that support a global reach. I?ve spent the past decade in and around start-up companies and it?s a rare company that has even two out of these three criteria in its earliest stages. So rarely will there be a company that can start its business ready to be completely global.

On the other hand, all young technology companies should be planning for how they will enter and compete globally. This focus should influence hiring decisions, building capacity and potential partnerships. The timing on when the company actually enters international markets will depend on when international opportunities are worth spending the time and energy to make the final adjustments internally for global launch. At that point, the company can finally take advantage of the vast opportunities in the global marketplace.

Advice for Big-Country Tech Start-Ups (U.S., Brazil, Japan & China)

I often hear particularly in the U.S. that international markets come later in the company?s plans. I rarely hear one of our technology industry gurus touting the benefits of early international market preparations. Instead of having the domestic market act as a benefit to growing the company, it can actually slow down long-term growth. For tech markets, often 80-95% of total markets are outside of the home market. To delay preparing for the whole potential market will slow growth. Even if you delay international market entry, start preparing by making connections and researching your market.

(?Born Global or No?? is a play on Walter Kuemmerle?s famous Harvard business case published in 2001: ?Go Global or No??)

The International Entrepreneur: International Business Readiness Checklist

This checklist was updated on November 17, 2014

Many companies start their international expansion as a reaction to unexpected market demand from overseas. A Japanese customer wants your product and is willing to pay a premium for shipping to Japan. Or one of your clients expands internationally and needs you to send your delivery to their Colombian offices.

As reactive foreign sales begin to expand your company?s scope, it is time to investigate what a proactive international expansion would mean for your company. Here are important considerations to be ready for expanding into your company?s first overseas market:

1.?Long-Term Management Commitment. If you don?t have this, then stop right now. For top management to buy into international expansion, it needs to fit well into the company?s overall strategy including any plans for current owners? exit (M&A, IPO, etc.).

2.?Market Research. What is the market?s potential? You?ll never be able to reach an exact number, but it should be a well-researched estimate. I find it helpful to use both secondary data from industry and government sources, as well as primary sources such as interviews/round tables with potential in-country partners and customers.

How much would customers pay for your product? Oftentimes companies are surprised by different cost expectations. Your current cost structure might price your product out of a market or make it highly competitive. Consider potential offering size changes too. For example, a downloadable software product might be better received as a Software-as-a-Service model.

Also, how much localization of your product will be needed for it to be competitive in the market? This includes any local regulations, certifications, market expectations of the product, localizing any marketing promotional materials and approach to sales, etc.

3.?Financial Capital to Fund the Expansion. Does your company have enough capital to fund not only the production of products for the new market but also all the start-up costs and extra funds should things not go according to plan? Is the expected payback period?

4. Market Entry and Related Legal Structures. There are many ways to enter new markets ? from indirect exporting through distributors to wholly-owned subsidiaries. Each have unique advantages and drawbacks. Know your choices before making assumptions. Many companies new to international markets assume that contracting with local representatives is the best way. That?s not true for all situations, especially when there is valuable intellectual property to protect. It is also vital to research any legal requirements for your chosen entry mode, as well as any industry-related restrictions.

5.?The Right Transportation. If you have product to transport, you?ll need an excellent freight forwarder or else another practical way to get your products and/or materials into the new market. An FF knows how to avoid costly mistakes and coordinate delivery of your products to market.

6. Local taxation, profit repatriation and corruption. As part of your research, learn about the local tax requirements and repatriation restrictions. Also, depending on the degree of corruption you may need to plan an anti-corruption policy for your company employees. Those caught bribing in another country may face fines and prison back home.

7.?International Staff Experience. You will need managers and other staff who are ready to meet the needs of overseas operations. If your company doesn?t have internal international experience, this can be supplemented with outside assistance from government assistance centers and consultants.

This is only the high-level list. Basically go through every function of your company to ask how international expansion will affect the function. Once you know your initial approach for each function, you?re ready. Just be prepared for surprises when another country?s business environment brings up issues that you didn?t know existed!

For all of its complexities, international expansion can unlock much larger potential than staying in one?s home market. It exposes the company to new ideas for product improvement. And can mitigate the risks associated with doing business in a single market (recessions, etc.).

This checklist was updated on November 17, 2014

For assistance researching your international markets, please contact Becky at [email protected]ur.com.

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